MASSACHUSETTS MEDICAL SOCIETY & another [Note 1] vs. COMMISSIONER OF INSURANCE.

LIACOS, J. We review, on reservation and report by a single justice of this court, the challenge of the Massachusetts Medical Society (Society) to a decision of the Commissioner of Insurance (Commissioner). In that decision, the Commissioner approved, in part, a hearing officer's decision regarding the calculation and collection of deferred premium liability on physicians' medical malpractice insurance for the 1988-1989 rate

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year. [Note 2] G. L. c. 175A, Section 5A (1986 ed. & 1987 Supp.). We decide that the Commissioner erred. He determined that in calculating the total deferred premium liability (TDPL), which has been recovered from certain physicians who terminate their coverage, the Medical Malpractice Joint Underwriting Association of Massachusetts (JUA) should not credit to such physicians, as part of their individual deferred premium liability (IDPL), amounts paid which represent the payment of subsidies such as those for exemptions and uncollectible liabilities (bad debt). St. 1986, c. 351, Section 38 (3) and (4), as amended by St. 1987, c. 69 and c. 169. We reverse the pertinent portion of the decision and remand the case.

1. Statutory background. The deferred premium liability statute was enacted after protracted controversy concerning JUA medical malpractice premiums for the rate years 1983 through 1985. On May 18, 1984, the Commissioner issued a decision ordering a 42% average increase in the rates for physicians for the period beginning July 1, 1983. Medical Malpractice Joint Underwriting Ass'n. v. Commissioner of Ins., 395 Mass. 43, 44 (1985). We determined that the Commissioner had misinterpreted the applicable statutes and had reached a decision not supported by substantial evidence in the record. We reversed and remanded the case. Id. at 45. Shortly before the Commissioner issued his decision on remand, St. 1985, c. 671, was enacted, freezing medical malpractice premium rates for policies issued after July 1, 1984, at the levels set in the Commissioner's May 18, 1984, decision. See Massachusetts Medical Soc'y v. Commissioner of Ins., 402 Mass. 44, 52 (1988). The freeze was made effective until May 1, 1986, and was later extended to July 1, 1986. Id. The JUA was prohibited from collecting premium increases during the years affected by that freeze. Id. at 52-53. The parties agree that physicians insured by the JUA paid interim premiums on their 1983, 1984, and 1985 policies which were "substantially less" than the premiums ultimately established for the policies.

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The TDPL is defined as "the difference between the amount of premium charges payable with respect to `all policies' issued between July 1, 1983, and July 1, 1986, and the amount of premium charges payable on these policies as established by the 1984 decision of the Commissioner." Id. at 51. The mechanism through which the JUA is to recover the TDPL was established in St. 1986, c. 351, Section 38, which provides for deferral of the amount due until July 1, 1987, and for the payment of predetermined portions of the total annually over a five-year period. Id. at 49. The statute also specifies that any physician covered by a JUA policy on or after July 1, 1983, and before July 1, 1986, who ceases to be insured by the JUA or ceases to practice in the Commonwealth (unless cessation is caused by death, by retirement due to disability or after having attained age sixty-five, or by relocation outside the Commonwealth immediately upon completion of a residency or internship) shall be liable for the accrued IDPL. St. 1986, c. 351, Section 38 (4), as amended by St. 1987, c. 69. However, if the cessation occurs after July 1, 1987, the IDPL is to be reduced by the amount of TDPL recovered from the physician pursuant to Section 38 (3). St. 1986, c. 351, Section 38 (4), as amended by St. 1987, c. 69.

Before turning our attention to the calculation of this credit, the issue on which we reverse the Commissioner, we also note that the statute specifies that, in recovering the TDPL, the Commissioner is annually to determine the portion of TDPL "then outstanding which is attributable to each risk classification of premium charges"; he is to attribute to each classification that portion of TDPL "then outstanding" which accrued with respect to policies issued between July 1, 1983, and July 1, 1986; and, he is to deduct from the portion of TDPL "then outstanding" any amounts of IDPL "which have been recovered pursuant to [Section 38 (4)]" (emphasis added). St. 1986, c. 351, Section 38 (3). As to JUA policies issued between July 1, 1987, and July 1, 1992, the Commissioner is to establish a rate for each classification which shall permit recovery of specified amounts (proportional payments), plus interest, of the TDPL outstanding. St. 1986, c. 351, Section 38 (3). The Commissioner points out

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that the rate must account for the shortfall in the recovery of TDPL due to bad debt and the exemption of certain physicians from the IDPL system, so that those who pay (proportional) deferred premium liability subsidize those who pay less than their accrued IDPL.

2. Calculating the credit. We noted above that the IDPL of certain physicians who cease to practice in the Commonwealth or to maintain coverage with JUA shall be reduced by the amount of TDPL recovered from them pursuant to Section 38 (3). St. 1986, c. 351, Section 38 (4), as amended by St. 1987, c. 69. The Society argues that the existence and amount of the credit toward IDPL are established in unambiguous statutory language, and that the Commissioner does not have discretion to adjust the amount. The Commissioner contends that the credit is the TDPL recovered which is attributed to the retirement of a physician's own accrued liability. Thus, he excluded subsidies from the credit. We conclude, for the reasons set forth below, that the Commissioner erred.

The IDPL is to be reduced, according to Section 38 (4), by the amount of TDPL recovered pursuant to Section 38 (3). The Commissioner focuses on the term "total deferred premium liability outstanding" in Section 38 (3) and argues that it is different in kind from TDPL; that it is independent of each physician's accrued liability; that it declines with each year's collections; and that it reflects amounts not collected from physicians who are exempt or who default. He states that TDPL is simply the sum of each physician's IDPL.

We, however, read Section 38 (3) differently. In describing how the TDPL shall be recovered, it specifies that the Commissioner shall annually determine the portion of the TDPL then outstanding which is attributable to each risk classification. We read this as referring to the segment of the TDPL which has not been paid; and interpret the reference to the portion of TDPL then outstanding as indicating that what has not been paid is a part of a whole, the TDPL. The term "then outstanding" distinguishes the amount not yet paid from the total (TDPL) which is defined in Section 38 (1). (See part 1 of the opinion.) Our view is reinforced by consideration of the purpose of Section 38 (3).

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It specifies how the TDPL is to be recovered. Of less significance is the fact that TDPL "then outstanding" is not defined in Section 38 (1), as are TDPL and IDPL. We decide, therefore, that the Commissioner erred in determining that the credit under Section 38 (4) for the amount of TDPL recovered pursuant to Section 38 (3) should not include amounts representing subsidies. [Note 3]

We acknowledge the Commissioner's arguments that the Society's interpretation might undermine the system and leave the JUA unable to collect some of the deferred liability, and that it is appropriate to adjust the IDPL credit now, "before the potential problem of departing physicians becomes acute." We also note that the hearing officer stated that the need to adjust the credits "is created by the inevitable collapse of the DPL system in its last years if adjustments are not made (or the statute changed)." Nevertheless, our review is constrained by the clear terms of the statute. [Note 4] The determination whether remedial action is warranted, and its possible form, are matters for the executive and legislative branches.

3. Conclusion. Judgment is to be entered in the county court reversing so much of the Commissioner's decision of May 23, 1988, as approved the hearing officer's decision directing the computation of IDPL credits, and remanding the case for further proceedings consistent with this opinion. The order of the single justice staying certain proceedings (see note 2, supra) is terminated.

So ordered.